Justia Securities Law Opinion Summaries

Articles Posted in Constitutional Law
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The SEC accused Defendant of violating antifraud and registration provisions of the Securities Act and antifraud provisions of the Exchange Act and Rule 10b-5. Defendant neither admitted nor denied those allegations but consented to a judgment containing four relevant prongs of relief. The SEC asked for “disgorgement” in that amount and calculated the prejudgment interest at $424,375.38. It did not specify the appropriate civil penalty but requested that the court impose one of the options in the highest tier allowed by statute.   The court entered final judgment ordering Defendant to pay $1,901,480 in “disgorgement” and $424,375.38 in prejudgment interest. It also imposed a civil penalty after concluding that Defendant’s conduct merited the highest amount provided by the Exchange Act   Defendant appealed each of those orders and the denial of an evidentiary hearing. He says the lack of an evidentiary hearing denied him due process. He also renews three substantive challenges to the district court’s remedies. The Fifth Circuit affirmed the district court’s judgment order.   The court explained that none of Defendant’s challenges to the district court’s remedies has merit. He has foreclosed some of them by failing to raise them timely or to raise them properly. And Congress has foreclosed his position on the availability of disgorgement without tracing or a profit-generating res. The district court had authority to impose each element of its remedies, and it did not abuse its discretion in doing so. View "SEC v. Hallam" on Justia Law

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Defendants settled a civil enforcement action that the Securities and Exchange Commission (“SEC”) brought against them for alleged securities violations. The SEC barred Defendants from denying that they engaged in the charged conduct as a condition of settlement (the “no-deny policy”). The parties executed consent agreements containing provisions to that effect and submitted them to the district court, which entered final judgments. Five years later, Defendants filed a motion under Rule 60(b)(4) and 60(b)(5) seeking relief from the final judgments to the extent that they incorporated the no-deny policy. They argued that the no-deny policy violates their First Amendment and due process rights. The district court denied the motion, and Defendants appealed.   The Fifth Circuit affirmed the district court’s ruling holding that Defendants are not entitled to relief based on any alleged First Amendment Violations. Defendants argue that, in denying their motion for Rule 60(b)(4) relief, the district court adopted a cribbed view of Espinosa that the Fifth Circuit rejected in Brumfield. The court wrote that Defendants read Brumfield too broadly. That decision expressly recognized that “a judgment is void under Rule 60(b)(4) only if the court lacked jurisdiction of the subject matter, or of the parties, ‘or it acted in a manner inconsistent with due process of law.’”   Next, Defendants asserted that the judgments here should “be set aside as violating the public interest under Rule 60(b)(5).” They argue that retaining the no-deny policy in the judgments harms the public interest. The court explained that Defendants failed to meet their burden of establishing that changed circumstances warrant relief. View "SEC v. Novinger" on Justia Law

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In February 2021, the State of Oklahoma endured record cold temperatures. The severe cold weather resulted in a shortage of the natural gas supply and in turn extraordinary natural gas costs for regulated utilities operating in Oklahoma. The cost of natural gas for the Oklahoma utilities during the two weeks of extreme cold exceeded their entire fuel acquisition cost in 2020. As a result, the Oklahoma Legislature enacted the February 2021 Regulated Utility Consumer Protection Act, 74 O.S.2021, ch. 110A-1, sections 9070-9081, to provide financing options to lower the economic impact on the utility customers. Most Oklahomans could not afford a one-time, cost recovery payment imposed by the utility, and the Legislature provided a new mechanism to spread the fuel cost recovery over a longer period to minimize the financial impact on utility customers. The Act authorized the Oklahoma Corporation Commission (Commission) to approve the recovery of costs through securitization. The Oklahoma Development Finance Authority requested that the Oklahoma Supreme Court assume original jurisdiction and approve the issuance of ratepayer-backed bonds pursuant to the Act. The Supreme Court assumed original jurisdiction and held the ratepayer-backed bonds were properly authorized under the Act and were constitutional. View "In re: Application of OK Dev. Finance Auth." on Justia Law

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After a scandal that led to plaintiff's resignation from his positions at Banc of California, plaintiff filed suit against Banc, several individual directors and Banc executives, and Banc's lead auditor. Defendant filed anti-SLAPP (strategic lawsuits against public participation, Code Civ. Proc., 425.16) motions to strike various of the causes of action plaintiff alleged.In the published portion of the opinion, the Court of Appeal affirmed the Brown order granting Defendant Brown's motion in part. The court held that statements in an annual 10-K report filed with the SEC constitute statements "made in connection with an issue under consideration or review by [an] official proceeding" under section 425.16, subdivision (e)(2). View "Sugarman v. Brown" on Justia Law

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After a scandal that led to plaintiff's resignation from his positions at Banc of California, plaintiff filed suit against Banc, several individual directors and Banc executives, and Banc's lead auditor. Defendant filed anti-SLAPP (strategic lawsuits against public participation, Code Civ. Proc., 425.16) motions to strike various of the causes of action plaintiff alleged.In the published portion of the opinion, the Court of Appeal held that statements Banc made in its Forms 8-K and 10-Q filed with the SEC, as well as related investor presentations and conversations, are protected activity under section 425.16, subdivision (e)(2) as matters under review and consideration by the SEC. Furthermore, statements related to financial projections were also protected under section 425.16, subdivision (e)(4), as matters of public interest. View "Sugarman v. Benett" on Justia Law

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Coscia used electronic exchanges for futures trading and implemented high-frequency trading programs. High-frequency trading, called “spoofing,” and defined as bidding or offering with the intent to cancel the bid or offer before execution, became illegal in 2010 under the Dodd-Frank Act, 7 U.S.C. 6c(a)(5). Coscia was convicted of commodities fraud, 18 U.S.C. 1348, and spoofing, After an unsuccessful appeal, Coscia sought a new trial, citing new evidence that data discovered after trial establishes that there were errors in the data presented to the jury and that subsequent indictments for similar spoofing activities undercut the government’s characterization of Coscia as a trading “outlier.” He also claimed that his trial counsel provided ineffective assistance, having an undisclosed conflict of interest. The Seventh Circuit affirmed. Even assuming that Coscia’s new evidence could not have been discovered sooner through the exercise of due diligence, Coscia failed to explain how that evidence or the subsequent indictments seriously called the verdict into question. Coscia has not established that his attorneys learned of relevant and confidential information from its cited unrelated representations. Coscia’s counsel faced “the common situation” where the client stands a better chance of success by admitting the underlying actions and arguing that the actions do not constitute a crime. That the jury did not accept his defense does not render it constitutionally deficient. View "Coscia v. United States" on Justia Law

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Guy Jean-Pierre, a corporate and securities attorney, aided an illegal stock trading operation. Through a series of self-dealing transactions, Jean-Pierre and his co-conspirators artificially inflated stock prices of a company they controlled. Jean- Pierre sent letters on the company’s behalf to the U.S. Securities and Exchange Commission (“SEC”) that contained false and misleading information and omitted material information from disclosures to potential investors. Jean-Pierre appealed his convictions for conspiracy to commit securities fraud and securities fraud as to four of the twenty-eight counts of conviction, arguing the district court erred in admitting evidence that he had previously used his niece’s signature without her permission to submit attorney letters to a stock trading website. Jean- Pierre also argued that three of the four convictions should have been reversed because the district court declined to give a requested instruction reiterating the government’s burden as to a specific factual theory. Finding no reversible error, the Tenth Circuit affirmed. View "United States v. Jean-Pierre" on Justia Law

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The Alaska Division of Banking and Securities civilly fined Sitnasuak Native Corporation shareholder Austin Ahmasuk for submitting a newspaper opinion letter about Sitnasuak’s shareholder proxy voting procedures without filing that letter with the Division as a shareholder proxy solicitation. Ahmasuk filed an agency appeal, arguing that the Division wrongly interpreted its proxy solicitation regulation to cover his letter and violated his constitutional due process and free speech rights. An administrative law judge upheld the Division’s sanction in an order that became the final agency decision, and the superior court upheld that decision in a subsequent appeal. Ahmasuk raised his same arguments on appeal to the Alaska Supreme Court. After review, the Supreme Court concluded Ahmasuk’s opinion letter was not a proxy solicitation under the Division’s controlling regulations, therefore reversing the superior court’s decision upholding the Division’s civil sanction against Ahmasuk without reaching the constitutional arguments. View "Ahmasuk v. Division of Banking and Securities" on Justia Law

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The Idaho Department of Finance ("Department") filed a civil enforcement action against appellant appellant, Sean Zarinegar, Performance Realty Management LLC ("PRM") and other nominal defendants, alleging Zarinegar and PRM committed securities fraud. The Department moved for summary judgment; Zarinegar and PRM responded with their own motion for partial summary judgment and a motion to strike several documents submitted by the Department in support of its motion for summary judgment. A few days before the district court was set to hear arguments on the motions, counsel for Zarinegar and PRM moved the district court for leave to withdraw as counsel of record. At the hearing, the district court preliminary denied the motion to withdraw, entertained the parties’ arguments, and took all matters under advisement. The district court later issued a memorandum decision and order denying, in part, Zarinegar’s, and PRM’s motions to strike. The district court also denied Zarinegar’s and PRM’s motion for partial summary judgment. The district court granted summary judgment for the Department after finding Zarinegar and PRM had misrepresented and omitted material facts in violation of Idaho Code section 30-14-501(2) and fraudulently diverted investor funds for personal use in violation of section 30-14-501(4). The district court then granted the motion to withdraw. The district court entered its final judgment against Zarinegar and PRM September 30, 2019. Zarinegar, representing himself pro se, appealed the judgment, arguing: (1) the district court lacked jurisdiction to enter judgment against him; (2) the district court violated his constitutional right to a jury trial and right to proceed pro se; (3) the district court’s denial of Zarinegar’s motions to strike as to certain documents was an abuse of discretion; and (4) the district court erroneously granted summary judgment for the Department. Finding no reversible error, the Idaho Supreme Court affirmed the district court's judgment. View "Idaho v. Zarinegar" on Justia Law

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Steven Thompson was a real estate developer and sole member and manager of SGD Timber Canyon, LLC (“Timber Canyon”), a real estate company that held an interest in a number of undeveloped lots in Castle Rock, Colorado. To buy those properties, Timber Canyon initially obtained a $11.9 million loan from Flagstar Bank. The properties went into foreclosure in October 2009. In February 2010, Timber Canyon filed for bankruptcy; Flagstar Bank sought relief from the automatic stay to allow it to proceed with the foreclosure. In the spring of 2010, Thompson met John Witt (“John”), who had worked in the construction industry in Denver but wanted to become a real estate developer. John eventually began working with Thompson and signed a letter of intent indicating that John would eventually obtain an ownership interest in Thompson’s company. Shortly thereafter, and without disclosing the fact that the Timber Ridge properties were in foreclosure and subject to a forbearance agreement, Thompson obtained an “investment” from John’s parents, Thomas and Debra Witt (“the Witts”). Ultimately, the Witts agreed to increase their initial $400,000 investment to $2.4 million. At no point did Thompson disclose to the Witts that Timber Canyon's properties were already highly leveraged; the company was in bankruptcy, the properties were in foreclosure, and the properties had been valued at only $6.75 million (an amount significantly less than the $31 million value that Thompson had represented to the Witts during negotiations). When the Witts’ note ultimately came due in the winter of 2011, Thompson defaulted. The Witts filed a civil lawsuit against him and contacted law enforcement. Thereafter, the State charged Thompson with two counts of securities fraud and one count of theft. A jury convicted Thompson on all counts, and the court sentenced him to the Department of Corrections for twelve years on each of the securities fraud counts, to be served concurrently, and eighteen years on the theft count, to be served consecutively to the securities fraud counts. As pertinent here, Thompson argued on appeal: (1) because the note at issue was not a security, insufficient evidence supported his securities fraud convictions; (2) the trial court erred by tendering an incorrect jury instruction regarding the meaning of “security”; and (3) his theft conviction had to run concurrently with his securities fraud convictions. The issue this case presented for the Colorado Supreme Court's review was whether: (1) the promissory note at issue was a security under the "family resemblance" test; (2) any error in the jury instruction defining “security” was not plain; and (3) consecutive sentences were permissible because different evidence supported defendant Steven Thompson’s securities fraud and theft convictions. Finding the note at issue was indeed a security under Colorado law, and no other reversible error, the Supreme Court affirmed Thompson's convictions. View "Thompson v. Colorado" on Justia Law