On June 21, 2018, the U.S. Supreme Court ruled that administrative law judges (ALJs) at the U.S. Securities and Exchange Commission (SEC) had been improperly appointed because they qualified as “Officers of the United States” under the “Appointments Clause” of the U.S. Constitution, who under the Constitution may be appointed only by the President, a court of law, or heads of departments. Lucia v. SEC, No. 17-130. Because the SEC’s ALJs had been selected merely by SEC staff, the Court held that they had not been lawfully appointed and therefore lacked constitutional authority to issue sanctions and penalties … Continue Reading
On June 12, 2018, New York’s highest court issued a ruling that a three year statute of limitations, not the six year statute applicable to fraud claims, applies to claims brought under New York’s Martin Act. People v. Credit Suisse Securities (USA) LLC, et al. The Martin Act is the New York State Blue Sky law that gives the New York Attorney General broad authority to bring civil and criminal claims arising from fraudulent conduct in connection with the sale and purchase of securities. While the claims thereunder overlap with those available under the U.S. federal securities laws, it has … Continue Reading
In the recent decision of Paniccia v MDC Partners Inc., Perell J. refused to grant leave to proceed with a putative secondary market securities class action under Part XXIII.1 of the Ontario Securities Act (OSA) against MDC Partners Inc and certain of its officers on the basis that the alleged misrepresentations were not material. The decision presents valuable insight into the assessment of materiality, an issuer’s obligation to disclose a regulatory investigation, and a plaintiff’s obligation to plead a corrective disclosure under Part XXIII.1.
Background to the Decision
In August 2015 the Plaintiff brought a putative … Continue Reading
Companies confronting serial class actions won much needed relief from the US Supreme Court yesterday, in a decision that held that a class action tolls statutes of limitations only for putative class members’ individual claims, and not for later-filed class actions. A second class action must be filed within the limitations period, or it is barred. The opinion in China Agritech v. Resh (“Resh”), written by Justice Ginsburg, is a welcome development for companies that have been subject to repeated class action lawsuits raising the same claims.
The Resh decision stems from a perceived ambiguity in earlier decisions … Continue Reading
On April 18, 2018, the U.S. Securities and Exchange Commission (“SEC”) announced proposed rules that would require broker-dealers to act in the best interests of their retail clients when recommending investments. The SEC opened the proposed rules to a 90 day comment period.
This announcement follows a March 15, 2018 decision by the U.S. Fifth Circuit Court of Appeals that vacated the so-called “Fiduciary Rule” promulgated by the U.S. Department of Labor (“DOL”) covering retirement fund investment advice. The Fiduciary Rule, in actuality a package of seven rules that broadly reinterpret the term “investment advice fiduciary” and related exemptions codified … Continue Reading
On March 6, 2018, in a fraud proceeding involving a virtual currency product, a New York federal court held that virtual currencies can be regulated by the Commodity Futures Trading Commission (CFTC) as commodities. Commodity Futures Trading Commission v. McDonnell (E.D.N.Y. Mar. 6, 2018). This ruling marks the first federal judicial endorsement of the CFTC’s position that it had such jurisdiction over virtual currencies, which the CFTC took in its 2015 order in the Coinflip proceeding. As such, this ruling represents a major step in defining the regulatory landscape in the United States for virtual currencies (also known … Continue Reading
On Wednesday, February 21, 2018, the Supreme Court resolved a circuit split by unanimously holding that an employee must report suspected securities law violations to the SEC in order to qualify as a whistleblower entitled to protection from retaliation under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”). Dodd Frank’s anti-retaliation protections do not extend to employees who only report such concerns internally to their employer.
In 2010, Congress passed Dodd-Frank, which, among other things: (1) provides for the payment of monetary awards to whistleblowers under certain circumstances whose tips to the SEC lead to the … Continue Reading
(The author was a member of the CBA National Class Actions Task Force 2016-2017)
At the CBA Annual Meeting on February 15, 2018, a resolution to approve, as best practices, a revised Canadian Judicial Protocol for the Management of Multi-Jurisdictional Class Actions was approved. The resolution also urges Canadian courts that administer class actions to adopt the revised Canadian Judicial Protocol.
The Revised Protocol builds on the existing CBA Protocol providing for the creation of a Notification List of all counsel involved in class actions involving the same or similar subject matter, and the approval and administration of settlements through … Continue Reading
Plaintiffs in class action claims for misrepresentation in the secondary market recently scored a victory when the Ontario Superior Court of Justice determined that not only does it have jurisdiction over these claims brought by Canadians who purchased shares of a company registered in Canada on a foreign stock exchange, but that Canadian securities and tort law should apply to such claims.
In August 2015 Mr. Paniccia commenced a class action against MDC Partners Inc and its officers (together, “MDC”) in Ontario for both a statutory misrepresentation claim under Part XXIII.1 of Ontario’s Securities Act and negligent … Continue Reading
On December 1, 2017, the Securities and Exchange Commission (SEC) commenced a civil action in the U.S. District Court against PlexCorps (also known as PlexCoin and Sidepay.ca) and its principals, Dominic Lacroix and Sabrina Paradis-Royer, seeking civil remedies including injunctive relief, an order freezing all of the defendants’ assets and disgorgement. The SEC alleges that the defendants marketed and sold securities called PlexCoin in violation of anti-fraud and registration provisions of U.S. securities law. On December 4, 2017, the SEC obtained an order freezing the assets of PlexCorps, Lacroix and Paradis-Royer. This case represents the SEC’s first fraud … Continue Reading
In Yip v. HSBC Holdings plc et al., 2017 ONSC 5332, Justice Perell was called upon to determine the jurisdictional reach of the Ontario courts to protect Canadian and foreign investors when the defendant is a foreign corporation whose shares do not trade on a Canadian stock exchange.
Yip, an Ontario resident who purchased shares of HSBC Holdings (Holdings) on the Hong Kong Stock Exchange, asserted both a statutory secondary market and a common law misrepresentation claim against Holdings and one of its former employees, alleging that he and other purchasers on foreign exchanges were misled … Continue Reading
On July 19, 2017 the United States Court of Appeals for the Second Circuit ruled that the Fifth Amendment’s prohibition on the use of compelled testimony in American criminal proceedings applies even when a foreign sovereign has compelled the testimony.
The US. Department of Justice (DOJ) laid criminal fraud charges against the Defendants, both former employees of the London office of a foreign based bank, after an investigation by the U.K. Financial Conduct Authority (FCA) into their role in the bank’s LIBOR submissions to the British Bankers’ Association.
During the FCA’s investigation, both Defendants were compelled to testify under threat … Continue Reading